Average Directional Index (ADX)

About:The Average Directional Index (ADX), Minus Directional Indicator (-DI) and Plus Directional Indicator (+DI) represent a group of directional movement indicators that form a trading system developed by Welles Wilder. The Average Directional Index (ADX) measures trend strength without regard to trend direction. The other two indicators, Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), complement ADX by defining trend direction. Used together, chartists can determine both the direction and strength of the trend. Source: stockcharts.com

What should you know?

ADX system has three components – ADX, +DI, and -DI

ADX is used to measure the strength/weakness of the trend and not the actual direction

ADX above 25 indicates that the present trend is strong, ADX below 20 suggest that the trend lacks strength. ADX between 20 and 25 is a grey area

A buy signal is generated when ADX is 25 and the +DI crosses over –DI

A sell signal is generated when ADX is 25 and the –DI crosses over +DI

Once the buy or sell signal is generated, take the trade by defining the stop loss

The stop loss is usually the low of the signal candle (for buy signals) and the high of the signal candles ( for short signals)

The trade stays valid till the stoploss is breached (even if the +DI and –DI reverses the crossover)

The default look back period for ADX is 14 days

On Kite:Load the ADX indicator from studies. Kite gives you an option to change the look back period, by default the look back period is set

You can customize the color of all the three components of the ADX system. Click on ‘create’ to load the indicator –

By default the ADX indicator is loaded below the instrument. The black line represents ADX, ensure it is above 25 while looking for the crossovers.

Alligator Indicator

About:An indicator designed to signal a trend absence, formation and direction. Bill Williams saw the alligator’s behavior as an allegory of the market’s one: the resting phase is turning into the price-hunting as the alligator awakes so that to come back to sleep after the feeding is over. The longer the alligator is sleeping the hungrier it gets and the stronger the market move will be. Source: infimarkets.com

What should you know?

The Alligator indicator is overlaid on the price chart

The indicator is made up of three simple moving averages – 13, 8, and 5 period averages are used

The 13 period MA refers to the Alligator’s jaw, 8 period MA refers to the Alligator’s teeth, and the 5 period MA refers to the Alligator’s lips

Once the above condition is satisfied, it means that the asset is trending up

When the uptrend is established, it is upto the trader to identify a good entry point within this trend

A sell signal is generated when the following condition is satisfied –

All three MA’s are separated

The price is below the 5MA, 5MA is below 8MA, and 8MA is below 13 MA

Once the above condition is satisfied, it means that the asset is trending down

When the downtrend is established, it is upto the trader to identify a good entry point within this trend

Periods when the 13, 8, and 5 MA are intervened (or moving flat) is considered a ‘no trader’ zone and therefore the trader is advised to stay out of markets

On Kite:Load the Alligator indicator from the studies. As you can see the default values of the moving averages are loaded i.e 13, 8, and 5.

As you can see, the indicator input also loads the ‘offset’ values for each MA. These offset values are also loaded by default values. Offsetting or displacing the moving average reduces the number of whipsaws in the average. Needless to say that you can change the default values for moving average and offset to any value that you deem appropriate. Further you can even customize the color of each indicator to your preference.

Here is the snapshot of how the indicator looks when the indicator is overlaid on the chart. Do notice there are 2 instances when the sell condition is satisfied (highlighted in red) and 1 instance when the buy condition is satisfied (highlighted in blue).

Aroon

About:Developed by Tushar Chande in 1995, Aroon is an indicator system that determines whether a stock is trending or not and how strong the trend is. “Aroon” means “Dawn’s Early Light” in Sanskrit. Chande chose this name because the indicators are designed to reveal the beginning of a new trend. The Aroon indicators measure the number of periods since price recorded an x-day high or low. There are two separate indicators: Aroon-Up and Aroon-Down.

A 25-day Aroon-Up measures the number of days since a 25-day high. A 25-day Aroon-Down measures the number of days since a 25-day low. In this sense, the Aroon indicators are quite different from typical momentum oscillators, which focus on price relative to time. Aroon is unique because it focuses on time relative to price. Chartists can use the Aroon indicators to spot emerging trends, identify consolidations, define correction periods and anticipate reversals. Source: stockcharts.com

What should you know?

The indicator measures the number of days since last high or low is made, hence the indicator is a measure of time relative to the price

Aroon consists of two component – Aroon up and Aroon Down

The default value for Aroon is 25 days. Aroon up measures the number of days since the last 25 day high occurred and Aroon down measures the number of days since the last 25 days low has occurred

Both Aroon up and Aroon down are plotted side by side

Aroon Up/Down is lower bound to zero and upper bound to 100

A buy is generated when Aroon up is above 50 and Aroon low is below 30

A sell is generated when Aroon down is above 50 and Aroon up is below 30

On Kite:Here is the snapshot of the indicator when loaded from studies –

As you can see the default period is 14, feel free to change this to any number you wish. 14 here represent the ‘number of days’. Do remember if the period is 14, the Aroon measures the number of days since the stock made 14 days high/low.

As you can see both Aroon up and Aroon Down are plotted.

Aroon Oscillator

Aroon Oscillator is an extension of the Aroon indicator. The Aroon Oscillator measures the difference between the Aroon up and Aroon down and plots the difference in the form of an oscillator. The oscillator swings between -100 to +100, with the ‘0’ level as the center point.

The snapshot below shows the Aroon Oscillator loaded on to the chart –

A reading above zero means that Aroon-Up is greater than Aroon-Down, which implies that prices are making new highs more recently than new lows. Conversely, readings below zero indicate that Aroon-Down is greater than Aroon-Up. This implies that prices are recording new lows more recently than new highs.

As you can see, the Aroon Oscillator is either going to be positive or negative the vast majority of the time. This makes interpretation straight-forward. Time and price favor an uptrend when the indicator is positive and a downtrend when the indicator is negative. A positive or negative threshold can be used to define the strength of the trend. For example, a surge above +50 would reflect a strong upside move, while a plunge below -50 would indicate a strong downside move. Source: stockcharts.com

Average True Range

About:Developed by J. Welles Wilder, the Average True Range (ATR) is an indicator that measures volatility. As with most of his indicators, Wilder designed ATR with commodities and daily prices in mind. Commodities are frequently more volatile than stocks. They were are often subject to gaps and limit moves, which occur when a commodity opens up or down its maximum allowed move for the session. A volatility formula based only on the high-low range would fail to capture volatility from gap or limit moves. Wilder created Average True Range to capture this “missing” volatility. It is important to remember that ATR does not provide an indication of price direction, just volatility. Source: stockcharts.com

What should you know?

Average True Range (ATR) is an extension of True Range concept

ATR is not upper or lower bound, hence can take any value

ATR is stock price specific, hence for Stock 1 ATR can be in the range of 1.2 and Stock 2 ATR could be in the range of 150

ATR attempts to measure the volatility situation and not really the direction of the prices

ATR is used to identify stop loss as well

If the ATR of a stock is 48, then it means that on average the stock is likely to move 48 points either ways up or down. You can add this to the current day’s range to estimate the day’s range. For example the stock price is 1320, then the stock is likely to trade between 1320 – 48 = 1272 and 1320 + 48 = 1368

If the ATR for the next day decreases to say 40, then it means that the volatility is decreasing, and so is the expected range for the day

It is best to use ATR to identify the volatility based SL while trading. Assume you have initiated a long trade on the stock at 1325, then your SL should be at least 1272 or below since the ATR is 48

Likewise if you have initiated a short at 1320, then your stoploss should be at least 1368 or above

If these SL levels are outside your risk to reward appetite, the its best to avoid such trade.

On Kite:As you can see, the default value of ATR is 14, which means to say that the system calculates the ATR for the last 14 days. Of course you can change this to any value to wish. Here is the snapshot –

Once you load the chart, ATR is plotted below the price chart as seen below –

So the next time you place a stoploss make sure you check the ATR value to see if stoploss level is relevant. You may also want to read more about volatility and its application (including volatility based SL) – Click Here

Average True Range Band

The ATR bands are an extension of the ATR concept. The idea is to plot an envelope around the stock price to evaluate if the stock prices are behaving “normally” or trending in a particular direction. In order to do this, the ATR band calculates the upper and lower band.

What should you know?

The ATR band calculates and plots the upper and lower envelope around the stock price

To begin with a moving average of stock price is calculated

The ATR value is added to the moving average value, and this forms the upper envelop

The ATR value is subtracted to the moving average value, and this forms the lower envelop

If the stock price penetrates either the upper or lower envelop, then the expectation is that the stock price will continue to move in the same direction. For example if the stock price has penetrated above the upper envelop, the expectation is that the stock will continue to move higher

On Kite:When you load the ATR band from studies, you will be prompted for few inputs –

Period refers to the MA time frame; the default value is 5 days. You can change this to whichever time frame that you deem suitable. We would suggest you ignore ‘shift’ parameter. For the ‘field’ option select ‘close’, this means to say that you are plotting the MA values on the closing prices. The rest of the options are mainly aesthetic features, feel free to explore them. Once you click create, you will see the ATR bands plotted on the chart.

Super trend

Before understanding the supertrend indicator, understanding the ATR is necessary as super trend employs ATR values to calculate the indicator values. The supertrend indicator is plotted over the price chart of the stock or the index. The indicator line changes its color between green and red based on the price moment in the underlying. Super trend does not predict the direction, rather once the direction is established it will guide you to initiate a position and suggests you to stay in the position till the trend sustains.

What should you know?

When plotted, the supertrend indicator appears like a alternating green and red continuous line

A buy signal is generated when the stock/index price turns greater than the indicator value. At this stage, the indicator color turn green and you can also see a crossover of the price versus the indicator (price greater than indicator value)

Once the long position has been established, the trader is advised to hold the position till the price closes below the green line. So in a sense the green line helps as a trailing stoploss for the long position

A sell signal is generated when the stock/index price turns lesser than the indicator value. At this stage, the indicator color turn red and you can also see a crossover of the price versus the indicator (price lesser than indicator value)

The sell signal can be used to initiate a fresh short or exit long. Although waiting for the sell signal to exit the existing long position can sometime lead to taking a loss. So the trader should use his discretion here

Once the short position has been established, the trader is advised to hold the position till the price closes below the green line. So in a sense the red line helps as a trailing stoploss for the short position

Supertrend is basically used to identify a trend therefore it works best in a trending market

The supertrend indicator when compared to a regular Moving Average trading system generates fewer false signals, for this reason the super trend indicator is preferred over a Moving Average trading system

On Kite:When you select Supertrend indicator from the list of studies you will be prompted for two inputs – Period and Multiplier.

Period refers to the ATR number of days. The default value on Kite is 7, which means to say that the system will calculate the ATR value for the last 7 days. You can input any value you deem suitable.

The multiplier refers to a value by which the ATR will get multiplied. The default value on Kite is 3, so whatever is the value of ATR, it will get multiplied by 3. Multiplier is a crucial input for Super trend. If the multiplier value is too high, then lesser number of signals are generated. Likewise if the multiplier value is too small, then the frequency of signals increase, hence chances of generating false trading signals are quite high. I would suggest you keep this value between 3 and 4.

Once the indicator is plotted, this is how it appears on the chart –

Notice how the indicator changes the color as the price moves. Also, whenever the buy/sell signal is generated green and red arrows are generated (respectively) prompting the trader to go long or short on the stock.

Volume weighted average price (VWAP)

VWAP is one of the one of the simplest indicators to use. It works on the principle of averaging the traded price in terms of volume traded. Let me give you an example of to help you understand this better.

Here is how Infy traded between 14:30 and 14:35 on 2nd Nov 2016 –

The data is quite simple to understand, for example, at 14:32, 2475 shares were traded, it made a high of 983.95, low of 983, and closed the minute at 983.1.

Now, we use this data and compute the VWAP price. In order to do this, we calculate the following –

Typical price = which is the average price of High, Low, and close

Volume Price (VP) = we get this by multiplying the typical price with its volume

Total VP = This is a cumulative number, which is got by adding the current VP to the previous VP

Total volume = This is again a cumulative number, which is got by adding the current volume to the previous volume

VWAP = We get this VWAP number by dividing the Total VP by Total Volume. The resulting number indicates the average traded price, weighted by volume.

Let’s do the math on Infy data –

As you see, the VWAP is a dynamic number, changing based on how the trades flow in.

How to use the VWAP?

VWAP is an intraday indicator, use it on minute charts. Often when you plot this, you will notice a jump at 9:15 AM, when compared to previous day’s data. Ignore this jump as it means nothing

VWAP is an average and like any indicators employing averages, this too lags the current market price

VWAP is used for 2 main reasons – to get a sense of intraday direction and to get a sense of the efficiency of order execution

If the current price is below VWAP, then the general opinion is that the intraday trend is down

If the current price is above VWAP, then the general opinion is that the stock is trending higher

If the VWAP lies in between the high and low, then the expectation is that the stock will remain volatile

If you intend to short a stock, then it is considered an efficient fill if you short the stock at a price higher than VWAP

Likewise, if you intend to go long on a stock, then it is considered an efficient fill if you go long at a price lower than VWAP

On Kite:

Open the chart of your preference and select VWAP from the studies drop down –

Note, VWAP can be applied only on intraday time frame and cannot be applied on EOD data.

Once you select the time frame (1 min, 5 mins, 10 mins etc), the engine calculates the VWAP and plots it on the chart as an overlay.

You can now visualize the VWAP and the current market price and plan your trades accordingly.

I think Super Trend is the best indicator or what I would say as super Profit machine. We should see first identify the 30 min Super Trend Signal – whether buy or sell and then see 5 min Super Trend signal line to enter the trade as per the 30 min Signal. Eg. if 30 min signal is in sell mode (red line above), then in 5 min mode take every sell signal that comes with stoploss of 5 min signal line. I have minted tons with this strategy hence sharing. Karthik Sir can elaborate further if there are any chinks in this strategy. Alternatively you may combine any longer term time frame to judge primary trend and take decision as per shorter time frame supertrend eg. 1 hr – 10 mins 🙂 Thank you

Hi vipul
Your strategy is good and works well in trending and low volatile market but in range bound market with high volatility it sometime fails. So I feel if we combine it with some other indicators like donchain channel, SMI, the result would be far more better.

First of all thanks to Karthik sir for his guidance & khyatiji for appraisal. What i meant by this strategy was take every long term signal i.e buy or sell signal on 30 min chart. In case of 5 min duration enter and exit as per 5 min chart signal. Please dont average especially in case of options it may not work due to decay in premiums. I normally believe in booking timely profits hence not encouraging average stuff.. all the best. 🙂

What happens when Sell signal appears in 5 mins chart after you have entered into trade looking at buy signal in both 30 mins and then 5 mins. Are you going to square off buy trade or keep it open until new signal appears in 30 mins chart?

Felt sorry for the losses that you incurred. See basically my ideology is take all the primary time frame & trend signal & in case you have missed it then switch to lower timeframe and take the signals equivalent to primary time frame. Hope not confusing ! Also you should have defined risk taking & risk management discipline planned in advance only before trade entry.
As Karthik Sir mentioned that in the market you might be equipped by numerous tools, but dont take anything for granted & guaranteed. Proper Trade Discipline & Stoploss would always save the skin. Nevertheless you can always cover up your losses. Don’t be disheartened. 🙂

What I have observed over a period of time, what signal Supertrend gives after 10-15 minutes, the same signal appears in Parabolic SAR 10-15 minutes before. SO you will certainly get much better price than Supertrend. So far, PSAR has been the best indicator ever I have come across.

Vipul, when you say “timely profit” and since you trade intraday, can you pls. explain your strategy, with the help of charts ( flashback feature from Q)? how & when you book ur profit or how & when you book ur losses?

Hi kartik
Thanks for this supplement notes on indicators. It is very useful and knowledge gaining too. Will you give such description on other indicators and chart pattern on kite, it would be very helpful. Also. Kite app can also contain all features of web based platform??

Hi kartik,
I am little confused. Please clear my doubt.
In kite, if I place a buy order with no trigger price then it buys at market price but if we give trigger price then buy when price reaches that price. Also if I want to buy at higher price than CMP but only when CMP reaches that price what should I do???
Is This concept applicable in case of placing stop loss. Can I need to place separate order for stoploss

Dear Karthik Sir
When a buy signal is generated by a supertrend indicator should we immediately go long at the market price or should we wait for the close of the candle (eg in a 5 min intraday chart) .Also how to determine the stoploss for a buy/sell signal generated by supertrend indicator.

Dear Kartik, thanks a lot for your precious efforts. I would just want to know which other indicators should I add with Supertrend so as to escape false signals (or at least minimize it) generated in the flat market.

I find two indicators useful to identify trends – simple moving averages and ADX. Also, you can use support and resistance to know if the markets are flat or trending. For example the markets between 3rd to 17th March was kind of sideways b/w 7400 to 7550…and you can identify this with simple S&R on daily charts.

Sir,
I have read so many books of famous writers on Stock market, but the way you had explained is marvelous. Thanks for sharing your knowledge. Could you pl. explain the breakout strategy and how to calculate entry and exit levels(targets) .
Thanks
Alok

Sir,
I have a doubt on Stop loss, Sir how to set a stop loss on particular stock while day trading ,
Can you please explain with an examples,
Sir which indicater can provide SL , Can i take pivot point support as SL .
Thanks

i have a doubt over timeframe of 30 minutes chart. You are closing 9:15am tick at 9:30 not 9:45. but when i refer to same chart later, it shows 9:15, 9:45 correctly which is wrong. 9:15 tick must close on 9:45 not 9:30 otherwise whole chart goes wrong. You can nifty chart for example tomorrow to verify my point.

please do not disclose personal details and trade details to 3rd party in any situation.
is it possible to add sl and target 1 2 3 on supertrend chart when it generate new signal. that will help a lot.

I have also mentioned about personal details and trade details since it was compromised recently. Someone from Hyderabad “Sri Mahalakshmi Enterprises” and R.SATHYANARAYANA AND B.RAMANI IYER – these people have obtained my address and trade details from your call center or some sources. They have even mentioned I have traded in forex. How come these confidential gone out? You need to enhance IT security and compliances. Those are fraudsters and I am one of the victim. I recommend Zerodha should send a circular to all customers so that nobody else become victim. They are working for some broker in chennai. They will try to harm other brokers and businesses.

It would be hard to do this, the only way to figure this out is by experience. However, sometimes volumes give some information…for example a pullback if associated with low volumes can indicate a possible reversal.

Sir,
This has been found that in some cases after candlestick hike for any stock followed by hammer , reversal starts, is this related with volume because as per price action inverted hammer should follow uptrend for reversal and vice versa

Last year, I started new after reading Varsity and earned few bucks. I traded NIFTY NFO Intraday. Similar to some other stories, I lost much more than I earned. Mostly because:
1) I wasn’t able to make a clear analysis of market
2) Didn’t have any strategy (like hedging)
3) Lack of clarity and a desire to earn led me to getting emotional with market
4) Emotions took a hold and I lost huge sums
And finally had to give up.

I’m in software industry right now with 8.5 years of experience but really want to get into trading, now sensibly and slowly.

Could you please guide me how can I approach towards analysing the market.
I’m starting the Varsity again but that’s just technical analysis, I also want to learn analysing the market based on the news we get from the markets. How can I do that.
Also, with your experience, do you have any honest suggestion for me?
I want to honestly start again. Looking forward for your reply.
Thank you.

Please take my advice – concentrate on your software profession as you have valuable experience of nearly 9 years. Dont get into active trading. Start investing small amounts for long term duration, once you are comfortable with this move towards making overnight short term bets. My guess is it will take you few years to get to this stage.

Sir,
Candlestick pattern do we need to check 1 day candle or can we check 5 minutes candle and take a decision on that, for intraday trading.
which is the best time frame candle for doing intraday trading.
Thanks

Sir I m little familiar to the stock market…but new to the technical analysis..I m really happy and surprised that I m understanding this tough subject very easily…I like to play only option trading…can you explain which candlestick or other analysis pattern is suitable for me?

Can i Buy shares in NSE and same can be sell in BSE in Intraday? I called you are call center executive,he told me we can do it for intraday. When i inquire out side,my friends are saying it is not possible..

Please let me know which one is correct.If it can be done, How? You are executive advised me to add the same script in Market watch for both stock exchanges NSE and BSE..While buying, Buy it from NSE and While selling select it from BSE and sell the same quantity…and the price difference is our profit…Is that true?

Hello
I have one confusion that how volume is calculated, is it same as number of quantity because for example 1 qty of eicher motor is more than 200 qty of ashok leyland, money infused in market is more in eicher but qty is showing more for ashok, so how this volume is calculated.

Hi,
I’m aware of 100 qty buy and sell makes 100 vol. But my question is in comparison of 2 stocks, one which is having low price like ashokley but high qty , while another is having high price like eicher motor but low qty. So while calculating pre market volume what needs to be considered , which is having higher volume.

Can every chart that we open give the ticking time of the market on top.
selection of the scrip of 2nd/3rd list does open in case we want to view chart of other scrip for quick view in popped out charts, we have to go to original charts .
can you incorporate these suggestions.
thanks

yes.
The timing of net and that of mkt is different by 1.5 to minutes. so every chart should idealy having timing in hr,min,sec.
as rgdsd my first point .. v see many charts and with many time frames and this is possible in kites due to popping out features. But on these charts is there:
1) any key to open market depth.
2) any function keys to place orders or buy or sell.
3) any function keys or shortcut key to view our mtm or position.
4) while changing the scrip name in d dropbox that appears, only the list no. 1 appears, and if v mention the scrip from list no. 2 or 3, it is not accepting or does not show in the dropdown window. It should ideally show if i hv the scrip in my match list from 1 to 5 anywhere.
I hope you will into these points.
thanks for responding immdly.

Hi karthik. Please I have a requirement on Pivot points from your technical team. I want to refer the values of 3 days pivot points with a time frame of 1 Hour. But if I take 1 hour time frame on Kite I can see a unique pivot values for the past 4 days. Till 15 Min chart we can see the different values but not 30 minutes and 1 Hour. Please inform this to your technical team.

We use a 3rd party charting platform over which we have very limited control, hence customizing the charts will be a challenge. However, you can use the Expert Advisor feature in Pi and build a work around for yourself, check this – https://zerodha.com/expert-advisors/

Karthik sir, thanks for your valuable advice on our various queries. Sir, though I will be the new to chart based investments.Sir, can I follow supertrend indicators for medium to long term investments in large as well as mid cap shares?

Sir,
Your work is so great as you / zerodha team also cannot think what a best work you have done by providing good knowledge in simple way on technical analysis. It is very difficult to say greatness of your work in few words. It is useful for enlighten thousands who was in dark. भद्र पुरुष ही महान कार्य करते हैं । Thanks a lot.
Sorry for taking your valuable time to ask – one should take average of 10 days volume for a share from BSE and NSE both or from a single exchange is sufficient.

Thanks for adding VWAP in the chart. Its such a powerful indicator for intraday trader. it is my humble request to please add preset order in kite in which script is pre selected including order type, Stoploss etc and only one click order get places.

Dear karthik,
Thanks for detailed explanation of the super trend and other indicators. I am new to Zerodha as opened account recently.
Today I noticed that Supertrend chart is showing different in Kite & Pi application.
For example Nse equity stock- Auropharma the Supertrend Sell (Red) occurred at 11:45 hrs in Pi where as it is showing at 14:30 in Kite.
While the settings for both are same at 14-3. Why kite is not showing same as Pi? This has misguided me as I am using Kite very easily compared to Pi which takes lot of time for refreshing. Please is it possible to make the settings in both application same or the user should have option to use whichever he likes. I would have uploaded the screen shot but I donot know how to do it here.
Thanks.

karthik sir, i want to ask that according to you the combination of a lagging and leading indicator such as MACD and stochastic will help in taking decision or not? because i read in an article that it is very accurate in trending markets.

Thanks Karthik for valuable Info… i am a user of PI, and am trying to write a script across MACD,ADX and SUPERTrend indicators but am not able to find ‘keyword code’ for SuperTrend Indicator ( checked even in Tradescript manual).. Pls help

Dear karthik,
I am reposting my query as u missed it.
Thanks for detailed explanation of the super trend and other indicators. I am new to Zerodha as opened account recently.
Today on 09-01-2017 I noticed that Supertrend chart is showing different in Kite & Pi application.
For example Nse equity stock- Auropharma the Supertrend Sell (Red) occurred at 11:45 hrs in Pi where as it is showing at 14:30 in Kite.
While the settings for both are same at 14-3. Why kite is not showing same as Pi? This has misguided me as I am using Kite very easily compared to Pi which takes lot of time for refreshing. Please is it possible to make the settings in both application same or the user should have option to use whichever he likes.
Thanks.

Hi friends. What level to cross in ADX to consider trending market and level to drop below to find non trending market? Because different people will tell different levels like 22, 25, 30, 40. Getting confused. Thanks.

Yeah so first of all,let me tell ya that this whole thing you guys created is totally most admirable.I’m sure this step of yours will help people losing their most of money! Now-I do have a question to ask you out,
You see there are two major or main stock exchanges in INDIA as BSE & NSE,and the whole wonderful world trades in that.Means-people from different places and with different point of views does exchange their money and therefore the price gets updated every second,then how come NSE & BSE gives same outcome of price of every single stock everyday?!

Karthik Sir, awesome work on all these modules. I am a new user of Pi and have 2 basic questions.
1) can we import the scrips added in marketwatch from kite to pi?
2) is there a way to apply the study done on one scrip to all my scrips in marketwatch.
Many thanks in advance.

As I see, the Pitchfork tool is not available on Pi . Any plans to introduce it it ? Also, can I draw pitchforks on different time frame charts of say, 50 scrips and SAVE all of them in Kite ?Will they load the same when I re-login ? Thanks..

A person X bets its 20,000 on, say, JSWSTEEL at 10:10AM @185.50. At 10:25AM, X books profit @186.10, making about 62/- (~0.3%). Similarly, it trades again to make profit of, say, 70/- (~0.3%) at 10:50AM-11:05AM. Trading 3-6 times a day, X makes about 1% return.

At the end of the month, X makes about 10-12% returns with scalping as X trades only 12-15 days a month.

Situation 2 –

A person X utilizes margins given by brokers for intraday trades up to 10 times. In this way, X is able to make about 10% returns a day (not 1%) as its 20,000/- can now buy stocks worth 2,00,000/-. At the end of the month, X is able to make about 90-100% returns (as compared to its 20,000/- amount) as X trades only 10-12 days a month with more care.

Question 1 – Are above situations possible in real world? Please elaborate why, why not, which situation, to how much level & so on? (As per me, these situations must be common)

Question 2 – If yes, what person X need to do to be such a successful trader as it is in above situations? Or, is it too difficult for a full time trader to be like X.

Question 3 – How above situation/s, or person X, can be modified/improved to make it a common practice?

Question 3 – What is your advice to me if I really aspire to be like person X?

(I have started intraday trading 2 years back & have nice experience of being severely lashed down. I terminated my trading a/c. Later I learned how to really trade in market & its relevant basics. I have been following markets for about 1.5 years. I found Zerodha Varsity 6 months ago. It took me last 3 months to go through Module 1 & 2 thoroughly along with its relevant application & practice in real world. I am about to move on to module 3 & think to go through all module in same way before I can confidently start full time scalp trading like X.)

Question 5 – After how many modules, can I be perfectly ready for real world scalp trading with real money & should have full confidence of being equipped with almost all required knowledge for scalping? (I think after half of module 4. Obviously, I will keep on finishing the rest side by side.)

I want to start with 1 trade a day that too by considering it like a swing way.

James, both the situations are possible…but let me tell you it’s not easy, especially situation 2!

The trick is to achieve consistency in your trades. Even the top hedge funds in the world fail to achieve this consistency. They say in trading, 20% is strategy and 80% is risk management. So there is lot more going on than just margins and strategy. Keep at it and I hope you find success. God luck.

Respected Sir,
Thanks for your kind attention !!!
_
My presumption was same. I’ll wait for the risk management module of varsity & will practice on that to perfect myself.
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I would be glad to know the answer to question 5 as well. Also, Is Varsity content (along with practice) enough to achieve that consistency?
_
Thanxxx again !!!

One more thing …
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In addition to question 5, please tell, as per your experience, how much return is possible (common in real world) in Situation 2?
_
Right now, I am preparing myself to achieve 40-50% returns every month in Situation 2. Is it ok? Isn’t my expectation more unreal (I guess not, your experience/advice =?)?
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Thanxx for all 3 answers in advance !!!

Cannot comment on returns, James. But sorry to sound discouraging, please do not be under the illusion that you will be able to generate a return like 50% every month…and please do not quite your job to do this full time. I myself don’t know anyone who is able to smash such numbers month after month.

Respected Sir,
.
Thanks for honest answers of my queries !!
Not quitting job so soon (obviously) not at least until I start achieving consistent desired returns.
.
Varsity content is really very helpful & elaborate. This is something that is not available easily at one place. Sometimes, I can’t believe varsity is offering it for free 🙂
.
Thanks a lot for such a good quality educational content !!!

How should i combine different indicators with candlesticks and chart patterns? is there is particular thing that needs to be kept in mind before combining indicators/candles/chart patters in order to optimize the desired outcome?

Give chart patterns higher priority, the trade idea should originate from candlestick patterns. Look at indicators just as a reconfirmation to the trade setup. I personally do not prefer relying too much on indicators.

For smaller/intraday trend identification, ADX is working fine in 5 & 15 mins timeframe.But Adx is not working/not increasing in higher time frames like 30mins, 1 hour and 1 day. Pls suggest ur view. I used to follow only SMA 21x50x100x200 for trend identification and it’s working fine in higher time frames.in addition to this kindly suggest for better evaluation.

Remember, a certain indicator with a certain parameter may work for a certain stock. The same may not apply for another stock. The trick is to calibrate and fine tune (to figure out what works and what does not work) it across your watch list.

First of all, I would like to say I learned a lot with your blogs. thanks for sharing valuable information. my question is that Which one is you would suggest using as I am new to this cover order or bracket order? I am starting with an initial capital of 5K rupees. and also can we modify stop loss on both?

Remember, there is is the EQ segment and the derivative segment. Any trade in the spot market or equity market is referred to as EQ trade. When you trade in EQ you can either do an intraday trade or you can take delivery of the stock and hold it overnight.

Hello, if I enter a trade as per Supertrend buy/sell call its almost sure that if I wait till the line colour to change it’ll lead to a loss or no profit. So, how am I supposed to set a decent target once trade is initiated?

Also, what could be taken as a better stoploss instead of supertrend line? Because if a closer target is set then the supertrend line stoploss wud b pretty far making RRR bad..

You need to start calibrating your trades to identify which parameters suits which stock. It is hard to use the same set of parameters across all the stocks. So start tweaking the numbers and see which supertrend parameter works for which stock.

Ty fr the info, I checked several 5min intraday charts and EOD charts and found that long call from supertrend indicator are almost giving 80-90% or even more correct signals and hence giving a profit. So, is it worth trading as per the indicator only?

Dear Karthik,
1.) Which Indicator in your opinion is the best Momentum indicator on a 5 min chart for day trading which I can confirm on a 15 min time frame also ?Kindly also mention any tweaked parameters if they work better than default values on 5 min chart.
2) The technical analysis is based on a premise that a human being with his knowledge, emotions,fear and greed will repeat the actions which his predecessors have been doing in the past and it reflects in the Chart patterns and various Technial analyses that have been employed in the market. Now with more and more Computers and Robots taking upon the trading each day, the human element will be eliminated.Does that mean that the analyses and trading methodologies which are being employed today will become redundant /obsolete in the near future ? If so , how can a mortal human being who doesn’t have access to Trading Robots/ Algorithms keep abreast with them ?
Thanks.

1) I like it simple, so I’d always prefer moving averages. Try the 21×9 mins tweak on 5 mins chart
2) I’d agree. Eventually we all have to find our edge and stick to it. However, the silver-lining is that most of the good algos operate in the micro-milli time frame. So in a sense larger time frame trader without the knowledge of coding still have some space to breath.

Dear Karthik,
Just two more things I forgot to ask was that (1) On the stochastic indicator on Kite, only the time period can be changed , colours of fast and slow can be changed and overbought + oversold values along with colours can be changed.I wanted to ask that what are the default settings of %K and %D on this indicator? Also, what is the default smoothing value?
(2) Correct me on this one :-
a) RSI(14) = RSI of 14 days on a daily chart = RSI of the last 14 Hourly candles on a hourly chart = RSI of the last 14 Five-minute-bars on a 5 minute chart and like wise….

It really depends on your trading temperament. I like to keep my charts clutter free…this helps me focus on price action as opposed to what indicators are suggesting. I just overlay moving averages (1 or 2) on the charts.

RE-TYPING as my message got truncated: ON VWAP:
VWAP: In the section – How to use the VWAP?
Point# 5 says IF CMP > than VWAP then the trend is on the positive side/higher. Contrary to this point# 8 suggests going long if the CMP VWAP.

RE-TYPING #2 as my message got truncated: ON VWAP:
VWAP: In the section – How to use the VWAP?
Point# 5 says IF CMP is higher than VWAP then the trend is on the positive side/higher. Contrary to this point# 8 suggests going long if the CMP less than VWAP.
As per my understanding, one should go long when CMP higher than VWAP.

If you are stating now, I’d suggest you look at doing equity investing – i.e holding positions overnight. Once you are comfortable doing this, then maybe you can try short term swing trading before BTST trades.

Hi Sir,
Default supertrend parameters is Period;7,Multiplier:3 .will it work for all time frames(1day,1month and 1 week)?
For intraday 5 mins ,10mins and 15 mins chart ,if we want to use super trend what are the preferable parameters ?

After going through TA module,I have started tracking mini crude oil may futures chart since last week. I see that sell signal is visible in 5 min chart while this is not visible in 15 min chart. Why so? Though both the charts are showing that the trend is on lowerside. Indeed oil prices have been pounded badly since last week.
2. What time frame chart is suitable for trading in crude futures?

Just wanted your help as I didnt know who to approach . I use metastock s/w for analysing the charts. I want to know how to use scanners…I mean suppose if 50 MA cossed 200 MA in any stocks or if the prices are above 50 day MA and 200 MA it gets highlighted easily . I tried asking the vendor but I am afraid it has not helped. Also tried googling . Would appreciate if you could point at the right direction.

i joined in zerodha on sep 2016. As of now I am doing only on equity cash segment and also i got winners certificate too in 60 days challenge. Can i get fundamental and technical analysis training to improve my trading and investing skills.

Hi Karthik,
First of all thanks for uploading all the trading research material in such a simplified manner, its good to re-learn again,
However my question is totally different (rather a suggestion)
1. I have 10-15 friends who are interested to trade in the stock markets but they can’t do so because of their working hours,
2. Is it possible, in Zerodha firm, that I log-in from a single “sub-broker” id and trade for them-on their behalf?
3. Logging-in from each individual id is quite time consuming and by the time I will do it the ground situations changes a lot.
4. I had also spoken to one of your representatives regarding this, but they said its not available.
5. Can this be made possible?
6. Asking you because found your brokerage rates, support to be the best (even helping in taxation arena)
7. Am sure, if you get a solution to this, lot of people who cannot trade would able to do so.

Sorry for the lengthy span of the question, but I guess it would be mutually beneficial

Thanks for your reply buddy, if it ain’t legally permitted then no use,
However I will open an account with Zerodha and will get all my 10-15 friends registered with you at the earliest.
But there is something like Auto-Trader (Proportionate Trading) provided by foreign brokerages in Forex trading – something similiar to your Open Trade
I guess if that comes under permissible rules, it can be extended in your brokerage aswell, and my problem would be solved partially.
Thanks anyways
Looking forwarding for good trading experience through your brokerage ( Last month I got 10% returns)
Thank You

Hello Karthik,
I have a query regarding a trading strategy that I use for day trading.
What I do is, use the VWAP indicator on 5 minute charts. Then I wait for the stocks’ price to fall to the lowest that it has been in the last two days, or allow it to rise to the highest that it has been in the last two days. I then take a long or a short position accordingly. I have been using this method for a few days now and have booked considerable profits except for when the price begins to consolidate.
I wanted to know if you see any drawbacks in this strategy.

Also, I should say what an awesome job you have been doing with these modules. It has helped me a lot.

Sir,
Head and shoulder pattern and double bottom , here we tend to make mistake like in head and shoulder tend to take a position in Support level (double bottom) but as per head and shoulder it will break and go down further…
But in double bottom it is an opportunity to buy ….
i just want to know like how to avoid that mistake and what is the difference between those two. …
Kindly explain…
Thanks

I am talking about day trading in nifty futures only.
Well we learnt a lot in this module. Now it is easy to analyse the pattern, trends etc in middle of the chart but its very difficult to take a stand near right edge of the chart where future is uncertain. As far as candle stick pattern and volume are concerned they are reliable but indicators are not so much useful. By the time they show a reversal or a new trend a large chunk of points has already gone.
I hope you got my point. Please advise me how to use these indicators or to do day trading for that matter.

Weel, this is in fact the whole point of TA. You need to get to a position where you will be able to take a position looking at the right side of the chart. This takes time and patience and will have happen over many trading hours and studying charts. Good luck.

Period refers to the ATR number of days. The default value on Kite is 7, which means to say that the system will calculate the ATR value for the last 7 days. You can input any value you deem suitable.

The multiplier refers to a value by which the ATR will get multiplied. The default value on Kite is 3, so whatever is the value of ATR, it will get multiplied by 3. Multiplier is a crucial input for Super trend. If the multiplier value is too high, then lesser number of signals are generated. Likewise if the multiplier value is too small, then the frequency of signals increase, hence chances of generating false trading signals are quite high. I would suggest you keep this value between 3 and 4.

Suppose ATR for X stock is 40 and multiplier is 3.Then 40 X 3 =120 what does this value indicate(ATR x MULTIPLIER).I STILL DONT UNDERSTAND WHAT VALUES TO BE PUT ON FOR PERIOD AND MULTIPLIER FOR INTRADAY TRADING AND FOR LONG TERM TRADING? WILL BE GRATEFUL TO U IF U PROVIDE MORE FOCUSS AND GUIDANCE ON IT?

Just to clarify more for intraday and longterm which of these following indiacators work well –
Period Multiplier
1) 7 3 long term or intraday
2) 7 4 long term or intraday
3) 10 3 long term or intraday
4) 10 4 long term or intraday
Can u please suggest as per ur preference 1 to 4
If there are other values to suggest please suggest as per ur experience with supertrend indiactor?

ATR that we get from Kite is different than that of Pi. I downloaded OHLC data from Pi and used it to calculate ATR for different periods of my choice. The ATRs were calculated using the simple average of the true ranges of previous periods, which was matching with data from Pi, but not with Kite.
Can someone please clarify how ATR is calculated on Kite? Mainly, what are the weights assigned to true range from previous periods?

Hi karthik sir,is it possible to earn RS 1000 per day from stock market consistently with a capital of RS 50000 by selecting a good trade a day?just one trade a day and no over trading. Is it easy and possible please suggest me?

Dear sir,
I did not get the point no.8 in ADX:
“The trade stays valid till the stoploss is breached (even if the +DI and –DI reverses the crossover)”

Say I go long when the +DI crosses the -DI, after few candles the -DI crosses over the +DI then as per rule the sell signal is generated then How can the the first trade (based on the buy signal) be valid ?

Dear sir,
thanks for becoming our guide in the jungle of stock market, I have few doubts :-
1.) Say, I have identified a stock and S&R levels and other related research, finally I am bullish on the same, and as per our general convention the first resistance point should be our target, now, what I want to know is that Is there any way to determine or predict the period it will take to hit the target??
(Source of doubt: Generally we hear from analyst and experts that ये 4 से 5 महीने का टाइम फ्रेम ह, इसका 6 महीने का होल्डिंग पीरियड ह etc etc.)

2.) The market depth generally shows top 5 ask and bid price, if the total number of qty for sell is say 3000(top five), now if I place a market order for 5000 share to buy then the remaining 2000 shares will be fullfilled from upper side or lower side .
How the large qty market orders affect the price?
Secondly, which one we should prefer market order or limit order?

3.)I am little bit confused about pre and post market orders , the kheechdi that cooks up during 9 to 9:15 , and , moreover who can and should place pre and post market orders and their merits and demerits.

Dear sir,
I did not get the VWAP, I have point wise doubts:-
1.-Is not the points 4 ,8 and 5,7 are contradictory to each other.
I mean in point 4 you say the if the price is below vwap then the stock is in downtrend , but in point 8 you say if you want to go long the stock it is efficient to long at a price lower than vwap, मतलब कोई स्टॉक downtrend में हैं तो भला उसको buy क्यों करेंगा ??

SAME DOUBTS FOR OTHER TWO POINTS, IT WILL HELPFUL IF YOU COULD ELABORATE EACH POINT WITH THE HELP OF CHARTS.

Q no. 1:- Please guide me how to follow the trend using ADX indicator, Should I keep the trade on till the ADX is rising and exit as soon as it reverses?

Q no 2 :- If the candlestick has already crossed the SMA but still my supertrend is in sell region, should I initiate a long position of should wait till supertrend indicator says buy?

Q no. 3 :- May also use the slope of supertrend itself to follow the trend, as I have seen that steeper the slope better moving is the trend, and whenever it goes flat, a moment of indecisiveness comes in; should I stick with this methodology or please give your kind suggestions..

1) ADX is best used to gauge the strength of the momentum. The decision to buy or sell has to originate from somewhere else…ADX is only complementary to that system
2) I’d rely more on candlesticks
3) Slope again points to the momentum. You may as well look at MAs.

Its like if I start trade by using MACD and supertrend, and then remain in trade using ADX? as it keeps on growing I shall keep my long/short positions intact and whnever it goes down I will quit as it will show the losing trend? isnt it ?

karthik,
I can see there is some technical error in dis module as the comments page is same irrespective of different chapters i.e support & resistance chapter, volume chapter comments page are all same…..
plz resolve dis issue soon

Ok Sir thank you.😃 but sir my last question is what moving average setting do you mostly prefer in 15 minutes chart.. Exponential, double exponential or triple exponential.. What is the most accurate one..

Hello Sir,
First of all, Thanks a lot for all your efforts you have put in for Varsity. This is very helpful.
I am not able to clearly decide on Support and Resistance level, Can you let me know any more parameters which I consider to get more affirmation on S/R levels.

Yesterday’s AMBUJACEM chart showed a bullish engulfing pattern. I entered CNC trade at 266.5 with a stop loss of 258 as suggested by ‘the lower of the two rule’. Today the stock closed at 272.10 and I am planning for a BTST trade.
My SL-M order cancelled automatically at 4pm by Kite. So probably I will need to place a new AMO SL-M for tomorrow . My question is that for the new SL-M order should I stay with the 266.5 suggested by earlier rule or should I increase it to the low of today’s green candle (264)?

Karthik, just a QN pop up in my mind…..can I buy shares in delivery (CNC) by not entering the quantity of shares I want to buy but the amount of money I want to invest in a company???
For ex rs 25k at cmp in a company instead of the QN of shares …

Hi, Karthik!
Thanks for the wonderful material!
Is candlestick pattern analysis is good for someone looking to hold the position for 1month to 3 months?
which is an ideal time frame to be selected? If not which technique to be used for analysis.